188体育

Meaning of payment

The words 鈥榩ayment鈥� and 鈥榬eceipt鈥� follow their normal meanings, consistent with case law (see for example the commentary on when interest is paid in CTM51790 and CFM35830). 鈥楶ayment鈥� is a movement of funds in discharge of a legal obligation and 鈥榬eceipt鈥� must be taken as having a corresponding meaning. Thus, the terms include the disbursement or collection of funds in settlement of loans, interest or other expenses, and advancing funds by way of loan, and receipt of funds borrowed. 鈥楻鈥� will include the note issue proceeds received by a note-issuing company at the outset of the securitisation, and 鈥楶鈥� will include any amount that it advances to an intermediate borrowing company by way of loan or which it pays to the originator by way of purchase price for the assignment to it of the securitised assets.

However, it is clear that, in the context of the regulations, the words apply only to payments and receipts to and from third parties, and do not include a company effecting payments into, withdrawals from or transfers between accounts of the same company that are solely beneficially owned by the company in question (even where, as will normally be the case, such accounts form part of the security for the capital market arrangement). This means that such a transfer does not give rise to a 鈥榩ayment鈥� from the first account and a 鈥榬eceipt鈥� in the second account, and does not start the clock ticking again for the purposes of the payments condition.

Where a company sets aside an amount of 鈥楻鈥� to build up 鈥楻A鈥�, it will generally do this by paying the sum in question into a deposit account which is solely beneficially owned by itself. The making of that deposit will not be regarded as a 鈥榩ayment鈥� by the company, and where the company makes a withdrawal from the account, it will not be regarded as a 鈥榬eceipt鈥�.

Nor will 鈥榩ayment鈥� include a transfer of funds by a company to a trustee who holds the funds as a nominee (or equivalent) for the company. However, 鈥榩ayment鈥� will include a transfer of funds to a trustee who holds the trust property in undivided shares for the company and other persons (as will typically be the case with a 鈥渞eceivables trustee鈥� of the type commonly encountered in securitisations), and 鈥榬eceipt鈥� will be construed on a corresponding basis.

It is common for securitisation companies to invest temporary accumulations of surplus cash received during a payment cycle in specified categories of permitted investments, exclusively beneficially owned by the company for so long as they are held by it. If such investments are pure deposits by the company (as would commonly be the case under 鈥榞uaranteed investment contracts鈥�), they will be treated in the same way as all other payments by the company into a bank account of its own.

On the other hand, if such investments are securities which the company purchases in the market, whether as a subscriber or in the secondary market, any amounts paid by the company to acquire such securities will be 鈥榩ayments鈥� and any amounts received by it on disposal or redemption of such securities will be 鈥榬eceipts鈥�. If this distinction is abused, the 鈥榰nallowable purposes鈥� provisions (CFM72570) may become relevant. In this connection, it should be noted that 鈥榩ermitted investments鈥� are normally held on a short-term basis (3 to 6 months) and only up to the end of the payment cycle in which they are acquired, at which point sale or redemption proceeds will normally be included in the funds which are subject to the applicable priority of payments for the company concerned.